Variable expenses are the budget killer. Are they pleasant recollections, or would you rather contemplate your most recent root canal? Many people, including myself, can recall past budgeting failures. Understanding your budget’s two most crucial components is essential for setting and maintaining a successful budget. There are two kinds of expenses: fixed and variable. You will be well on your way to having a successful experience with the budget once you have a clear understanding of the difference between these two categories and how they relate to the process of making a budget.
All expenses that you can list with confidence because you know how much they will cost each month are considered fixed expenses. For instance, since you are aware that the monthly payment on your car loan will be the same, it is simple to plan for that predetermined expense. The same holds true for things like your rent or house notes, insurance premiums, loan payments, and so forth. You can even set up a budget plan to track your utility bills so you know how much you can expect to be charged each month. You can easily plan for and stick to your budget because you know in advance how much each of these categories will cost you each month.
With your variable costs, not so much. These are the bad guys in the world of budgeting. When you least expect it, they sneak up on you. They will grow to the point where they destroy your finances, confidence, and budget due to their voracious appetite. If you want a budget that works, you must be aware of and control your variable expenses.
What is variable expenses
All expenses that change from month to month are considered variable expenses. Because they are influenced by behavior and circumstances, they are never fixed. For instance, you consume more takeout than you anticipated, depleting your dining-out budget. You drive more frequently and for longer distances than you anticipated, which has ruined your auto budget. You will need to keep daily records of your variable expenses and always know how much you are spending and how much is left over in each category in order to create a successful budget.
You won’t be caught off guard by “no more money but a lot more month” if you track it every day. When you know how much you have to spend on eating out on a daily basis, you can make a better decision about whether you should choose the 3-dollar pizza in your freezer or the 14-dollar-delivered pizza. If you know how much money you have left over before you spend it, you can plan better and make better decisions about where and when to spend your money.
Therefore, prior to your subsequent attempt at budgeting, take some time to determine which of your expenses are fixed and which are variable. You’ll be able to enjoy the freedom of a well-planned and smoothly operating budget if you commit to controlling your variable expenses. You will then enjoy being in charge of your finances rather than dreading the memories of unsuccessful attempts.